Fred Dakota Founded Native American Casinos —In a U.P. Garage

With his unemployment about to run out and five kids to feed, Fred Dakota had to make something happen. Hmm … He knew where to get a casino license … and his brother-in-law had a two-car garage … As tribes celebrate the 25th year of casino gaming in Michigan, we share the story of how a tenacious Michigan man who never made it past the eighth grade landed the first full-scale Native American casino license in America and helped create an industry that reshaped Indian Country.

When Fred Dakota thinks back on his garage casino, and how it helped propel Native American gaming to the nearly $30 billion a year industry it is today, he thinks back to a moment during a tribal council meeting of the Keweenaw Bay Indian Community that happened some time about 1980. The council was meeting to write rules for high-stakes bingo because the tribe, based in Baraga, a tiny Upper Peninsula village on the shores of Keweenaw Bay, needed money to finish a housing construction project that had run out of federal grants.

The meeting was important, so most, if not all, of the dozen council members were there in the tribal headquarters, a rambling, old brick building that had been a Catholic orphanage for Indians. On this particular night of talking bingo rules, elder Helene Walsh said in a casual way, why don’t we add casino gambling into the code too?

At the time, tribal members probably did not have a complete understanding of the implications of their decision to act on Walsh’s suggestion, but they went ahead and added rules that would regulate casino gaming on their reservation and in spring of 1981 submitted the document to the Bureau of Indian Affairs office in Sault Ste. Marie.

“Back then, we used to joke that when something landed in a BIA in-box, it stayed in the in-box,” says Dakota, who was administrator of the tribe at the time. To avoid BIA delays, the tribe had included in its constitution a provision that said if the BIA doesn’t act upon something within two weeks, the request was automatically approved.

“So that’s what happened, no hearings, nothing. It got approved because there was zero action,” Dakota says.

One could argue that inaction on the casino rules proved to be one of the great non-acts of modern American Indian history. At the time, the tribe was not allowed to advertise bingo on television, so tribal members printed up flyers and pinned them on grocery store bulletin boards and elsewhere in towns within about a 30-mile radius of Baraga.

“The day we were going to have our very first bingo game, the state bingo commissioner and the lieutenant from the state police post knocked on my door at the tribal office,” Dakota says. Their message: the tribe’s bingo plan was against the law.

Fred Dakota then displayed the street fighter instincts that eventually left an impact on gaming nationwide. “I said I’m going to do what I’m going to do, and I don’t want you there bothering my customers. We have a treaty with the U.S. government that allows us to do this.” The tribe went ahead with bingo night. “The only one who showed up was the bingo commissioner, and he never bothered anybody,” Dakota says.

The tribe started offering bingo twice a week and expanded from there. Soon, the tribe finished the housing project and paid off $300,000 in debt; they put money into health and education. “Everything got taken care of through the bingo game, and we were starting to accumulate a little bit of savings,” Dakota says.

A turning point for Dakota came during the election of tribal officers for the 1982 annual term. “You have to have seven votes to win,” Dakota says. “But I only had five.” The administrator job is a paid position; it had been Dakota’s livelihood for 15 years, and suddenly he was out of work.

He did odd jobs, collected unemployment benefits, looked for something steady. But it was during the early 1980’s recession that hit Michigan hard. Unemployment statewide was nearly 17 percent, and up here, on the rocky shores of Lake Superior, with U.P. backcountry spreading for miles around, tribal unemployment was 40 percent.

The 12 months of unemployment checks went by fast, and as Dakota was nearing the end of his benefits, he knew he had to think of something. But what?

Then Dakota recalled the idea that Helene Walsh had, and the casino rules the council had written. He thought about his brother-in-law’s two-car garage in Zeba, a tiny reservation village carved out of U.P. forest a few miles north of L’Anse.

“I went to the tribal council, and I said I’d like to get one of those gambling licenses that we have in our code.” If approved, it would be the first license for a full-scale Indian casino in the United States. “They all looked at each other and said, yeah, you can get one of those licenses. And they all kind of laughed,” Dakota says.

But Dakota had those five kids to feed, so he didn’t let the joking alter his path. “I went to the banker and said, ‘I want to tell you about something. I have a gambling license, I have this garage. I want to put in his and her bathrooms, some coolers, a bar, craps tables.’ ” The banker approved a $10,000 loan.

Dakota quickly set to work in his brother-in-law’s garage. He insulated and nailed chipboard to the walls and ceiling. “I left it natural,” he says. The floor remained just a plain cement garage floor. He and his brother-in-law built the bar. Dakota couldn’t afford real blackjack tables, so he bought some green felt and built two tables. He didn’t have room for a full-scale 16-foot craps table, so he bought a little one, about half-size, a toylike thing with tiny legs that Dakota set on another table for elevation. He bought three used poker machines from a guy in Marquette.

“I had lights hanging over the blackjack tables and other lights behind the bar, you know, casino stuff,” Dakota says. He went to the drugstore in L’Anse and bought cards and plastic poker chips—red, white and blue.

On the last day of 1983, New Year’s Eve, Dakota was ready to open the doors of The Pines, a casino and bar. Thinking back to the tribe’s success in marketing bingo with flyers, he had taken the same approach with his casino. He pinned flyers on bulletin boards, tucked them under car windshield wipers in grocery store parking lots. But as the opening moment neared, he recalls, “I was afraid, scared to death,” thinking about getting raided by the police. “I didn’t know what the hell was going to happen, but when you have five children to feed, you get innovative.”

Leading up to opening night, Dakota and his wife, Sybil, had been practicing how to deal blackjack. “We had a book that told how to do it,” he says. But come opening night, his wife was too nervous about dealing, so she tended bar, and Dakota did all the dealing at one table. And the people came to play. Cars parked in the driveway, on the shoulder of the road and in the trailer park next door.

“We must have had about 40 people in that two-car garage, and no law enforcement came,” Dakota says. “I thought, Well this is all right.”

The Pines casino opened every night from then on, just Dakota and his wife running the place. For a couple of weeks that was okay, but word spread fast, and soon people were standing around, waiting too long for seats at the table. Dakota built more blackjack tables and hired more dealers, eventually squeezing six tables into the garage.

“I started making decent deposits at the bank,” he says. “The bank was happy. I was happy. And there was no government interference whatsoever.”

Brad Dakota, Fred’s son who was in college then, remembers the first time his dad made $1,000 in a night at the casino. “He was standing in the kitchen, and he counted the money, and then he just threw it all up in the air.”

Eventually, a $1,000-night was not such a big deal. Brad recalls closing up in the middle of the night and carrying out lock-boxes with $10,000 in them. “I’d just take them to Dad’s house—it was a different time,” he says.

So, how was it that the state police didn’t raid the place and shut it right down? Here’s Fred Dakota’s reasoning for why he was legal. The state of Michigan already allowed casino gambling for something called Millionaire Nights. Nonprofit groups were allowed to hold Millionaire Nights three times a year, and customers could take part in limited gambling. With state policy allowing gambling in certain situations, it was certifying the activity as legal but regulated, like, say, distributing alcohol—it’s legal to do it, but you have to abide by certain rules. And since Indian reservations had the right to regulate legal activities, and since the tribe had written regulations for casino gambling, and since Dakota had a casino license based on those regulations, he was legal. This line of reasoning was ultimately rejected by the courts on various grounds, but Dakota ran with it.

Dakota’s garage quickly became too packed, standing room only. Within a few months he knew he needed a bigger place, so he leased some land from the tribe in Baraga, right along U.S. 41, and hired the tribal construction company to build a 3,200-square-foot casino, intending to open July 4, 1984.

“I had everything bought,” he says. “Maybe 15 blackjack tables. I had a regular length craps table. And I had about 26 employees.”

But the tribal council was not in full support of the new casino, and when it came time to move in, the tribal police visited the casino and told Dakota he couldn’t operate a casino there because his license was only valid in Zeba. He couldn’t appeal the decision until the next tribal council meeting, which was a month away. Staying true to form, Dakota told the tribe, “I’m moving in anyway.”

He opened up July 4 as planned in defiance of the tribal council, and the tribe called the U.S. Attorney General’s office. It took a year for the case to be decided, and Dakota continued to operate the casino in the meantime. The judge ruled that the casino violated Michigan’s gambling laws, and he made a point to say Michigan’s laws stipulated that gambling can only be performed by non-profit organizations, not private individuals or corporations.

That decision shut down Fred Dakota’s Pines casino 18 months after he started it in the Zeba garage. He appealed and lost again in the Cincinnati federal appeals court, and he would have taken the case to the U.S. Supreme Court, but by then, all the money he’d made in the casino had been spent on legal fees.

“Ironically, had he been able to afford another appeal he may have prevailed,” says Joseph O’Leary, a former KeweenawBay tribal attorney and now county prosecutor. “Barely a year later, essentially the same legal reasoning he relied on was legitimized by the Supreme Court, which upheld the authority of the Cabazon Band of Mission Indians in California to regulate gambling activities that were not criminally prohibited by state law.”

The impact of the Dakota decision did, however, go far beyond shutting down The Pines. Michigan tribes were quick to seize on language in the ruling that stated gambling is legal only for non-profit organizations. Tribes are, after all, nonprofit organizations.

Within a matter of weeks, the Bay Mills Tribe introduced casino gambling, and shortly after that the Grand Traverse Band expanded its bingo operation to include casino gambling. Each expansion pushed the bounds of Indian gaming and had implications nationwide. There were still uncertain years ahead, with government attempts to reign in Indian gambling at various casinos around the nation, and tribes really didn’t have solid footing for gambling until Congress passed the Indian Gaming Regulatory Act in 1988.

Dakota’s days in the gaming industry weren’t over, however, with the appeals decision that closed The Pines. The Lac View Desert band hired him to run its casino, and eventually, Dakota was reelected chairman of the Keweenaw Bay Indian Community, so he had a hand in gaming there. Along the way, Dakota’s pugnacious approach led to other controversies that at times passionately divided the tribe, and eventually he became the target of a successful criminal prosecution by the federal government. Those controversies go beyond the scope of this story, and more important, they do not diminish his role in setting the course of Native American gaming from his brother-in-law’s garage.

Looking back on those days of the garage casino, Brad says, “He didn’t ask permission, that was the single most important thing he might have done. He didn’t ask the BIA, he didn’t ask the state police, he didn’t ask the attorney general’s office. I don’t think Indian gaming would be what it is today if Fred Dakota had asked for permission.”

Fred Dakota still thinks occasionally of his friend Helene Walsh, the woman who suggested writing casino rules with the bingo rules. “She was a dear friend and she has since passed away, but I often think, What if she hadn’t said that that night,” he says.

Native Americans in Northern Michigan

MyNorth.com is the online home of Traverse, Northern Michigan’s Magazine, the flagship publication of MyNorth Media, a Traverse City, Michigan company dedicated to sharing stories and photos about vacations, restaurants, wineries, the outdoors and more from Traverse City to Sleeping Bear Dunes and up to Mackinac Island.